TRILOK CHAND JAIN Vs. SWASTIKA STRIPS PVT LTD

JUDGEMENT

(1.) THE exordium facts for winding up the respondent-company are that Swastika Metal Works was a registered partnership firm having 11 partners in it. Swastika Strips Private Limited was incorporated on November 8, 1988. Swastika Strips Private Limited, respondent No. 1, entered into a partnership with Swastika Metal Works, respondent No. 2, on March 16, 1989, which was later on dissolved on March 31, 1989. On the dissolution of the partnership firm, its assets and liabilities were taken over by the company, i. e. , Swastika Strips Private Limited, respondent No. 1, according to the balance-sheet drawn up on March 31, 1989. The authorised capital of the company was Rs. 10 lakhs divided into 1,00,000 equity shares of Rs. 10 each. In the balance-sheet drawn up, shares were allotted to the partners of the partnership firm at the time of its dissolution. However, no shares were allotted to the partners, namely, Trilok Chand Jain and Dinesh Kumar Jain. At the time of dissolution of the firm, the value of goodwill of the firm was kept at Rs; 1 crore. Resultantly, Rs. 10,24,500. 27 due to the shares of Trilok Chand Jain and Dinesh Kumar because of the inflated goodwill kept at the time of dissolution of the partnership firm were shown to their credit. It is on the basis of this amount which the petitioners assert as an admitted amount due by the company but it has failed to pay the same in spite of statutory notices served on it, that the winding up of the company has been sought. It may further be noticed that various small amounts other than the amount stated above are stated to be due to the other petitioners. It is pertinent to mention at this stage that, on the dissolution of partnership on March 31, 1989, the liabilities and assets of the partnership were taken over by the company, respondent No, 1, as per account standing as on March 31, 1989, which was drawn up by N. K. Jain and Associates ; N. K. Jain is none else but the son-in-law of Darshan Lal. One of the sons of Darshan Lal Jain, Neeraj Jain, filed a suit before the Additional Senior Sub-Judge, Jagadhri, for a declaration that the dissolution is bad. Further, a declaration for rendition of accounts and a permanent injunction restraining the partners from receiving and recovering any amount from the company till the time the true and faithful accounts are rendered was also sought. An ex parte injunction was granted by the Senior Sub-Judge, Jagadhri, on September 28, 1989, and the company was restrained from paying any amount to defendants Nos. 1 to 10 or their relations but the said injunction did not survive after October 28, 1989.

(2.) THE company resisted the winding up, firstly, by taking a defence that since there is an arbitration clause in the dissolution deed of the partnership firm, the winding up proceedings are liable to be stayed under Section 34 of the Indian Arbitration Act, which prayer was declined. It was further submitted that in fact no amount is due. The amount of the goodwill as shown in the balance-sheet amounting to Rs. 1 crore is bogus and, therefore, cannot be taken into account as the correct figure. The capital of the partners in the partnership account will be payable at the time of final dissolution of the firm. In fact Swastik Metal Works (Regd.) was a losing concern and remained closed since the beginning of 1988. It has further suffered a loss to the tune of Rs. 1,17,74,099. 16 up to the year 1988-89 and the said loss was to be shared by ten partners. It is with the intention to offset the said loss that the goodwill of the firm was kept at more than Rs. 1 crore. It is only with the intention of offsetting the said loss that the company was floated and, in this mechanism, firstly, entered into partnership (registered) in the ratio of 50:50 and thereafter dissolved the same after handing over the rights and liabilities to the company. It is with this objective that the value of the goodwill was increased. Similarly, the value of the land and building was also increased. The same was added to the partnership account so that there may not be any loss to the firm payable by the partners. The respondents specifically undertook at the Bar that they are ready and willing to pay and clear all the liabilities as per the balance-sheet so far as the minor petitioners are concerned.

(3.) LEARNED counsel for the petitioners has vehemently argued that shareholders and partners are seeking liquidation because various amounts are due to them from the company and the company is unable to pay the same as envisaged by Section 435 (e) and (f) of the Companies Act. The petitioners are only claiming that money which the respondents agreed to pay in view of the balance sheet drawn up irrespective of the fact whether it comes to their share on account of value of the goodwill kept or not. In the alternative, winding up of the respondent-company under Sections 433, 434, 439, 582 and 583 of the Companies Act, 1956, has been sought.